Richard T Lishman is the founder and CEO of money4dentists, the specialist independent financial advisers, who have been exclusively supporting dentists and their partners since the 1990’s. money4dentists can also help with mortgage or practice loans, private medical insurance, pension forecasts, and more. Here he considers income protection.
The last 18-months have demonstrated how important it is to be protected financially when unable to work. Income protection has very much come to the fore, but which do you choose? At any one time, there are over fifty income protection plans available, and they can all look great on paper – but what should you ensure is included in your policy?
The pandemic has seen some self-employed workers go without insurance pay-outs as their policies had not covered the specific circumstances. However, there were Self Employment Income Support Scheme (SEISS) payments available through which the government paid people grants dependent on their earnings.
But the self-employed were adversely affected; on average, they were granted income at 5% below their expected levels. It may not sound like much but for a newly qualified dentist with a family such a loss of earnings could significantly impact their quality of life. So, effective income protection becomes a wise move, but how does it work?
You will usually pay for your cover on a monthly basis, and there are two ways in which a premium can be paid – which are either through reviewable rates or guaranteed rates. Guaranteed ensures that you pay a set amount across the duration of the plan (usually to age 60). As the rate is guaranteed it means that it can never change regardless of the amount of claims you make.
Reviewable rates mean you will pay a set amount for the first five years and after that time the company can review your rate and adjust it. Their review will be based on the number of claims made and your predicted future claims. Typically, reviews take place every five years but they can be annual.
Finding a financial protection policy that best suits you can prove overwhelming and can lead to ill-informed decisions being made, but there are specific areas that should be covered in your policy.
One can claim for mental health, injury, permanent disability, and death. During 2020 the insurance industry paid out the highest combined figure on record – up 8% compared to 2019. These figures show a rise in mental health claims whereas claims under critical illness saw a 6% fall.
A lot of plans include a ‘suited’ by training, education or experience as an occupational definition. This means that benefits will only be paid out if you can’t perform any role similar to dentistry, such as pharmaceutical or research work.
There are also ‘any’ occupation plans which should be avoided at all costs, as the word suggests you will have to be incredibly ill/injured not to be able to carry out any role in order to claim. What you should want in your policy is ‘own’ occupation definition of disability meaning that you will receive payment of a claim based on your inability to perform solely as a dentist.
It is vital to find a company that has a good track record and provides a policy that works for you, but you also need to be aware of ‘exclusions’ those things they will not pay out for. There are some companies that have as many as fifteen exclusions in their policies and commonly pregnancy, dangerous activities, and excessive alcohol consumption are among those listed.
There are just a few more things you should look out for when choosing a policy. The plan should run to the age that you wish to retire. Worldwide cover is also ideal because – should you move abroad – you won’t have to return to the UK in order to make a claim.
It is best to ensure that your standard of living is also protected with inflation protection. HIV cover is another important criterion that your policy should meet and should be covered if you become infected at work. Your policy should include ‘Day 1 Cover’ meaning that you are protected from the very first day of sickness or injury.
See the original article here: Dental Industry Review